35% cost $48 to replace equipment
5% lose $750 in damage costs
15% save $800 in battery costs
10% cost $350 for last-minute rental
What is total EMV? The book says it should be a "-$30.70" and that if you add $30.7 to your budget you will account for risks? I am struggling with this, I think you should not reduce budget at all in this case since in fact you get a saving of $30.7 cumulative EMV of the risks. Let me know your thoughts please.
Treat add every threat and remove every opportunity.
35% cost $48 to replace equipment : THREAT : + $16.8
5% lose $750 in damage costs : THREAT : + $37.5
15% save $800 in battery costs : OPPORTUNITY : - $120.0
10% cost $350 for last-minute rental : THREAT : + $35.0
Add them and you will get -$30.7 as total EMV of the RISK. Therefore you should add $30.7 to your contingency reserve.
Hope this helps.
Then on page 434 answer for the exercise, (used for risk reserve), threats are added (+) and opportunities are negative (-).
So my question, are EVM values labeled differently when selecting alternative then when calculating reserve? The same book, Rita seem contradictory or at best confusing...Please help
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